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The Russian central bank has announced it is claiming damages valued at $230 billion against the securities depository Euroclear. This move is a clear response by the Kremlin regarding proposals to use immobilized Russian state funds to aid Ukraine.

The Financial Lawsuit

According to accounts in Russian state media, the central bank initiated a claim last week for approximately 18 trillion roubles. This amount corresponds to the stated $230 billion demand.

European Union officials are set to determine in the coming days regarding a plan to use approximately €210 billion in frozen Russian assets. This scheme entails granting Ukraine with a substantial loan to finance its defence and financial needs.

The vast majority of these assets, amounting to €185 billion, are held at the Euroclear clearing house in Brussels. This institution acts as the main custodian for the Kremlin's immobilised financial reserves.

Dispute on Ownership

European Union authorities have argued that their plan is on solid legal ground. Their position rests on the fact that ownership of the state assets remains with Russia, even though it was frozen in European countries shortly after the 2022 military offensive of Ukraine.

Moscow, however, has called any utilization of the funds as theft. It has threatened retaliatory measures, including seizing European private investors' assets within Russia.

Kirill Dmitriev, who has assumed a key position in peace negotiations, stated on X that Russia "will prevail in court" and regain its funds. He added that the European Union, the common currency, and Euroclear "will suffer" from the plan.

Strategic Positioning

With statements interpreted as an attempt to create division between Europe and the United States, the official characterized the proposal as "a vicious assault on the right to ownership and the international reserves system established by the United States."

Euroclear refused to provide a statement on the latest lawsuit. The institution has in the past noted it is facing more than 100 lawsuits in Russian jurisdictions.

Enforcement Challenges

Although judges in EU countries are not expected to recognize rulings from Russian tribunals, analysts expect Moscow to pursue enforcement in countries with stronger ties to the Kremlin.

"Russian monetary authorities could try to enforce a Russian legal ruling against Euroclear in jurisdictions like China, Hong Kong, the UAE, Kazakhstan, and other sympathetic nations, if such assets can be identified," commented a legal expert from an NSP law firm.

European Safeguards

European authorities said they are developing measures to discourage other nations from aiding any Russian legal action against EU companies. They are also crafting safeguards to protect EU countries with investments in Russia from what they term "illegal expropriation."

The Proposed Loan Mechanism

According to the complex scheme, the EU would provide an initial €90 billion loan to Ukraine, using the proceeds generated from the immobilized assets at Euroclear. Importantly, Russia's ownership claim on the principal funds would stay unaffected.

Kyiv would solely be obligated to repay the loan in the event that Russia consented to pay reparations for the immense damage caused during the nearly four-year war.

Other Funding Ideas

Belgium, backed by Italy, Bulgaria, and Malta, has urged the EU to examine an alternative method for financing Ukraine. This involves common EU borrowing to secure a loan, backed by unallocated funds within the European budget.

Such a proposal, nevertheless, requires unanimity among all 27 member states. The Hungarian government, viewed as friendly with the Kremlin, has previously expressed its opposition.

Commenting on Monday, the EU foreign policy chief, Kaja Kallas, described the reparations loan as "the strongest solution" for supporting Ukraine. "The reparations loan is secured against the Russian immobilized funds, which means it is not drawn from our public funds, which is also significant," she remarked. "It also sends a powerful message that if you do all this destruction to another country, you must pay for the rebuilding."